SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-3295
--
MINERALS TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
DELAWARE 25-1190717
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
405 Lexington Avenue, New York, New York 10174-1901
(Address of principal executive offices, including zip code)
(212) 878-1800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
---------- ----------
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
CLASS OUTSTANDING AT July 24, 1998
Common Stock, $.10 par value 22,268,312
MINERALS TECHNOLOGIES INC.
INDEX TO FORM 10-Q
Page No.
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PART I. FINANCIAL INFORMATION
---------------------
Item 1.
- -------
Financial Statements:
Condensed Consolidated Statement of Income for
the three-month and six-month periods ended
June 28, 1998 and June 29, 1997 3
Condensed Consolidated Balance Sheet as of
June 28, 1998 and December 31, 1997 4
Condensed Consolidated Statement of Cash Flows for
the six-month periods ended June 28, 1998 and
June 29, 1997 5
Notes to Condensed Consolidated Financial Statements 6
Independent Auditors' Report 9
Item 2.
- -------
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
-----------------
Item 1.
- -------
Legal Proceedings 13
Item 4.
- -------
Submission of Matters to a Vote of Security Holders 13
Item 6.
- -------
Exhibits and Reports on Form 8-K 13
Signature 14
Page 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
(thousands of dollars, June 28, June 29, June 28, June 29,
except per share data) 1998 1997 1998 1997
---- ---- ---- ----
Net sales.............. $155,752 $151,765 $299,854 $289,391
Operating costs and
expenses:
Cost of goods sold... 107,256 107,400 206,529 204,501
Marketing,
distribution and
administrative
expenses........... 19,829 19,007 38,683 37,336
Research and
development expenses. 5,282 5,179 10,159 10,224
------- ------- ------- -------
Income from operations. 23,385 20,179 44,483 37,330
Non-operating deductions,
net.................. 2,517 1,619 3,826 3,088
------- ------- ------- -------
Income before provision
for taxes on income
and minority interests 20,868 18,560 40,657 34,242
Provision for taxes on
income............... 6,820 5,940 13,248 10,957
Minority interests..... (609) 259 (49) 356
------- ------- ------- -------
Net income............. $14,657 $12,361 $27,458 $22,929
======= ======= ======= =======
Earnings per share:
Basic................ $ 0.65 $ 0.55 $ 1.22 $ 1.02
Diluted.............. $ 0.63 $ 0.54 $ 1.18 $ 1.00
Cash dividends declared
per common share $ 0.025 $ 0.025 $ 0.050 $ 0.050
Shares used in the computation of earnings per share:
Basic................ 22,464 22,563 22,505 22,575
Diluted.............. 23,203 23,036 23,208 23,036
See accompanying Notes to Condensed Consolidated Financial
Statements.
Page 3
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(thousands of dollars) June 28, December 31,
1998* 1997**
-------- --------
Current assets:
Cash and cash equivalents.......... $39,716 $41,525
Accounts receivable, net........... 109,030 108,146
Inventories........................ 57,997 61,166
Other current assets............... 11,212 15,745
------- -------
Total current assets........... 217,955 226,582
Property, plant and equipment,
less accumulated depreciation
and depletion - June 28, 1998 -
$355,285; Dec. 31, 1997 - $349,538 495,665 500,731
Other assets and deferred charges.... 21,430 14,094
------- -------
Total assets................... $735,050 $741,407
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt.................... $ 13,471 $ 13,989
Accounts payable................... 32,227 33,163
Other current liabilities.......... 45,791 47,066
------- -------
Total current liabilities...... 91,489 94,218
Long-term debt..................... 88,323 101,571
Other noncurrent liabilities....... 81,832 78,621
------- -------
Total liabilities ............. 261,644 274,410
------- -------
Shareholders' equity:
Common stock....................... 2,550 2,537
Additional paid-in capital......... 142,463 139,113
Retained earnings.................. 438,594 412,264
Accumulated other comprehensive
loss.............................. (20,907) (14,344)
------- -------
562,700 539,570
Less treasury stock................ 89,294 72,573
------- -------
Total shareholders' equity..... 473,406 466,997
------- -------
Total liabilities and
shareholders' equity......... $735,050 $741,407
======= =======
* Unaudited
** Condensed from audited financial statements.
See accompanying Notes to Condensed Consolidated Financial
Statements.
Page 4
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
--------------------
(thousands of dollars) June 28, June 29,
1998 1997
OPERATING ACTIVITIES
Net income............................. $27,458 $22,929
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and
amortization.................... 26,588 25,860
Other non-cash items.............. 4,226 824
Net changes in operating assets
and liabilities................. 5,223 (3,090)
------ ------
Net cash provided by operating
activities........................... 63,495 46,523
------ ------
INVESTING ACTIVITIES
Purchases of property, plant and
equipment............................ (35,621) (30,126)
Acquisition of business................ (33,486) --
Proceeds from disposition of business.. 32,357 --
Other investing activities, net........ 452 3,762
------ ------
Net cash used in investing activities.. (36,298) (26,364)
------ ------
FINANCING ACTIVITIES
Proceeds from issuance of short-term
and long-term debt................... 273 11,528
Repayment of debt...................... (13,799) (25,000)
Purchase of common shares for treasury. (16,721) (3,576)
Dividends paid......................... (1,128) (1,130)
Proceeds from issuance of common stock 3,363 878
Other financing activities, net........ -- 1,423
------- -------
Net cash used in financing activities.. (28,012) (15,877)
-------- -------
Effect of exchange rate changes on
cash and cash equivalents............ (994) (343)
-------- -------
Net increase (decrease) in cash and
cash equivalents....................... (1,809) 3,939
Cash and cash equivalents at beginning
of period............................ 41,525 15,446
------- -------
Cash and cash equivalents at end of
period............................... $39,716 $19,385
======= =======
Interest paid.......................... $ 3,601 $ 4,240
======= =======
Income taxes paid...................... $ 7,489 $ 6,576
======= =======
See accompanying Notes to Condensed Consolidated Financial
Statements.
Page 5
MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared by management in accordance with
the rules and regulations of the United States Securities and
Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted. Therefore, these
financial statements should be read in conjunction with the
consolidated financial statements and notes thereto contained
in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997. In the opinion of management, all
adjustments, consisting solely of normal recurring adjustments
necessary for a fair presentation of the financial information
for the periods indicated, have been included. The results for
the three-month and six-month periods ended June 28, 1998 are
not necessarily indicative of the results that may be expected
for the year ending December 31, 1998.
NOTE 2 -- INVENTORIES
The following is a summary of inventories by major
category:
June 28, December 31,
(thousands of dollars) 1998 1997
--------- ---------
Raw materials.................... $ 17,027 $ 19,605
Work in process.................. 4,727 5,858
Finished goods................... 19,544 19,812
Packaging and supplies........... 16,699 15,891
-------- --------
Total inventories................ $ 57,997 $ 61,166
======== ========
NOTE 3 -- LONG-TERM DEBT
The following is a summary of long-term debt:
June 28, December 31,
(thousands of dollars) 1998 1997
--------- -----------
7.75% Economic Development Revenue
Bonds Series 1990 Due 2010 (secured)... $4,600 $4,600
Variable/Fixed Rate Industrial
Development Revenue Bonds Due 2009..... 4,000 4,000
Variable/Fixed Rate Industrial Develop-
ment Revenue Bonds Due April 1, 2012... 7,545 7,545
Variable/Fixed Rate Industrial Develop-
ment Revenue Bonds Due August 1, 2012.. 8,000 8,000
6.04% Guarantied Senior Notes Due
June 11, 2000.......................... 26,000 39,000
7.49% Guaranteed Senior Notes Due
July 24, 2006.......................... 50,000 50,000
Other borrowings......................... 1,649 1,914
------- -------
101,794 115,059
Less: Current maturities................. 13,471 13,488
------- -------
Long-term debt...........................$88,323 $101,571
======= =======
Page 6
NOTE 4 -- EARNINGS PER SHARE (EPS)
Basic earnings per share are based upon the weighted
average number of common shares outstanding during the period.
Diluted earnings per share are based upon the weighted average
number of common shares outstanding during the period assuming
the issuance of common shares for all dilutive potential common
shares outstanding. The following table sets forth the
computation of basic and diluted earnings per share:
BASIC EPS THREE MONTHS ENDED
-----------------------
(in thousands, except per share data) June 28, June 29,
1998 1997
-------- --------
Net income..............................$ 14,657 $ 12,361
Weighted average shares outstanding..... 22,464 22,563
-------- --------
Basic earnings per share................$ 0.65 $ 0.55
======== ========
DILUTED EPS
Net income..............................$ 14,657 $ 12,361
------- --------
Weighted average shares outstanding..... 22,464 22,563
Dilutive effect of stock options........ 739 473
------- -------
Weighted average shares outstanding,
adjusted.............................. 23,203 23,036
------- -------
Diluted earnings per share..............$ 0.63 $ 0.54
======= =======
BASIC EPS SIX MONTHS ENDED
-----------------------
(in thousands, except per share data) June 28, June 29,
1998 1997
-------- --------
Net income..............................$ 27,458 $ 22,929
Weighted average shares outstanding..... 22,505 22,575
-------- --------
Basic earnings per share................$ 1.22 $ 1.02
======== ========
DILUTED EPS
Net income..............................$ 27,458 $ 22,929
-------- --------
Weighted average shares outstanding..... 22,505 22,575
Dilutive effect of stock options........ 703 461
-------- --------
Weighted average shares outstanding,
adjusted.............................. 23,208 23,036
-------- --------
Diluted earnings per share.............. $ 1.18 $ 1.00
======== ========
NOTE 5 -- COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income,"
which establishes standards for the reporting and display of
comprehensive income and its components in general purpose
financial statements for the year ending December 31, 1998.
The following are the components of comprehensive income:
THREE MONTHS ENDED
-------------------
(thousands of dollars) June 28, June 29,
1998 1997
-------- --------
Net income................................. $14,657 $12,361
Other comprehensive income, net of tax:
Foreign currency translation adjustments.. (5,603) 198
Unrealized holding gains (losses)......... (44) 30
------- -------
Comprehensive income.................... $ 9,010 $12,589
======= =======
SIX MONTHS ENDED
-------------------
(thousands of dollars) June 28, June 29,
1998 1997
-------- --------
Net income................................. $27,458 $22,929
Other comprehensive income, net of tax:
Foreign currency translation adjustments.. (6,565) (7,017)
Unrealized holding gains (losses)......... 2 18
------- -------
Comprehensive income.................... $20,895 $15,930
======= =======
The components of accumulated other comprehensive loss, net of
related tax are as follows:
June 28, December 31,
1998 1997
-------- -----------
Foreign currency translation
adjustment........................... $(20,021) $(13,456)
Minimum pension liability adjustments.. (1,001) (1,001)
Unrealized holding gains............... 115 113
------- -------
Accumulated other comprehensive loss $(20,907) $(14,344)
======= =======
Page 7
NOTE 6 -- ACQUISITION AND DIVESTITURE
On April 30, 1998 the Company acquired for approximately
$33.5 million in cash a precipitated calcium carbonate (PCC)
manufacturing facility in the United Kingdom from Rhodia
Limited. This acquisition allows the Company to establish a
base for its specialty PCC business in Europe. The transaction
was accounted for as a purchase. The purchase price exceeded
the fair value of net assets acquired by approximately $8
million, which is being amortized on a straight-line basis over
25 years.
On April 28, 1998 the Company sold its limestone operation
in Port Inland, Michigan to Oglebay Norton Company for cash and
receivables approximating $34 million. The sales price was
equivalent to the net book value of the assets.
Page 8
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Minerals Technologies Inc.:
We have reviewed the condensed consolidated balance sheet of
Minerals Technologies Inc. and subsidiary companies as of June
28, 1998 and the related condensed consolidated statements of
income for each of the three-month and six-month periods ended
June 28, 1998 and June 29, 1997 and cash flows for the six-
month periods then ended. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information
consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in
scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material
modifications that should be made to the condensed consolidated
financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet of
Minerals Technologies Inc. and subsidiary companies as of
December 31, 1997, and the related consolidated statements of
income, shareholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated January
22, 1998, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1997 is fairly
presented, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
KPMG Peat Marwick LLP
New York, New York
July 31, 1998
Page 9
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INCOME AND EXPENSE ITEMS
As a Percentage of Net Sales
----------------------------
Three Months Ended Six Months Ended
------------------ ----------------
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
-------- -------- -------- --------
Net sales................ 100.0% 100.0% 100.0% 100.0%
Cost of goods sold....... 68.9 70.8 68.9 70.7
Marketing, distribution
and administrative
expenses............... 12.7 12.5 12.9 12.9
Research and development
expenses............... 3.4 3.4 3.4 3.5
----- ----- ----- -----
Income from operations... 15.0 13.3 14.8 12.9
Net income............... 9.4% 8.1% 9.2% 7.9%
===== ===== ===== ====
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 28, 1998 AS COMPARED WITH THREE MONTHS
ENDED JUNE 29,1997
Net sales in the second quarter of 1998 increased 2.6% to
$155.8 million from $151.8 million in the second quarter of
1997. Sales growth from ongoing operations, which exclude the
divested Midwest limestone business, was 6.3%. The stronger
U.S. dollar had an unfavorable impact of approximately $3.5
million or 2.3 percentage points of sales growth.
Worldwide sales of Precipitated Calcium Carbonate (PCC),
which is used in manufacturing processes of the paper industry,
grew 16.6% to $85.6 million from $73.4 million in the second
quarter of 1997. This increase was primarily attributable to
the startup of seven new satellite plants since the second
quarter of 1997 and to initial sales to the paper industry from
the acquisition of a specialty PCC business in the United
Kingdom.
Currently, one PCC satellite facility is under construction,
located in Courtland, Alabama. This plant, which will be
equivalent to five satellite units, is scheduled to begin
operations during the first half of 1999. (A "satellite unit"
produces between 25,000 and 35,000 tons of PCC annually.) The
Company now operates 53 satellite plants in 12 countries
worldwide.
Beginning in 1998, sales of pyrolytic graphite products,
previously reported in the Processed Minerals product line, are
reported in the Refractory product line. Prior year's sales
have been reclassified to reflect this change. Net sales for
the four quarters of 1997 were $1.1 million, $1.0 million, $0.5
million and $0.7 million respectively.
In April 1998, the Company divested its Midwest limestone
business in Port Inland, Michigan. References to ongoing
operations exclude the results from this facility. Net sales
from the Midwest limestone business in the second, third and
fourth quarters of 1997 were $6.4 million, $8.3 million and
$5.9 million, respectively. Net sales from this facility in
the second quarter of 1998, prior to the divestiture, were $1.3
million.
Net sales from the ongoing operations of processed mineral
products decreased 4.1% in the second quarter of 1998 to $20.9
million, compared to $21.8 million reported in second quarter
1997. However, the operating margin as a percentage of sales
showed significant improvement over the second quarter of 1997.
Net sales of refractory products, primarily used in the
steel industry, decreased 4.6% in the second quarter of 1998 to
$47.9 million from $50.2 million in the same period last year.
Foreign exchange had an unfavorable impact of approximately
$1.8 million on refractory product sales.
Income from operations rose 15.9% in the second quarter of
1998 to $23.4 million. This increase was due primarily to
growth in the PCC product line; improved profitability in
refractory products, due primarily to the successful execution
of the Company's strategy of introducing high value innovative
products, and to increased profitability in the processed
minerals product line.
Page 10
Non-operating deductions increased primarily as a result of
foreign exchange losses in Asia.
Net income grew 18.6% to $14.7 million from $12.4 million in
the prior year. Earnings per common share, on a diluted basis,
were $0.63 as compared to $0.54 in the same period last year.
SIX MONTHS ENDED JUNE 28, 1998 AS COMPARED WITH SIX MONTHS
ENDED JUNE 29, 1997
Net sales in the first half of 1998 increased 3.6% to $299.9
million from $289.4 million in 1997. Excluding the effect of
foreign exchange and the divested Midwest limestone business,
sales growth was 8.0%. This increase was due primarily to the
continued expansion of the PCC product line. PCC sales
increased 14.7% to $165.1 million compared with $144.0 million
in the first half of 1997. Worldwide sales from the ongoing
operations of processed mineral products decreased 4.5% to
$39.4 million. Refractory product sales decreased 3.9% to
$93.7 million compared with $97.5 million in the first half of
1997. This decrease was primarily due to unfavorable foreign
exchange rates.
Net sales in the United States increased 5.3% in the first
half of 1998 primarily due to the growth in the PCC product
line and solid growth of refractory products. Net foreign
sales increased approximately 5.9% in the first half of 1998 as
a result of the continued international expansion of the PCC
product line.
Income from operations rose 19.3% to $44.5 million in the
first half of 1998 from $37.3 million in the previous year.
Non-operating deductions increased primarily as a result of
foreign exchange losses in Asia.
Net income increased 19.8% to $27.5 million from $22.9
million in 1997. Diluted earnings per common share were $1.18
as compared with $1.00 for the first six months of 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position remained strong in the
first half of 1998. Cash flows in the first half of 1998 were
provided from operations and the divested Midwest limestone
business and were applied principally to fund $35.6 million of
capital expenditures, the acquisition of a specialty PCC
business, the repurchase of common shares for treasury and to
remit the required principal payment of $13 million under the
Company's Guarantied Senior Notes due June 11, 2000. Cash
provided from operating activities amounted to $63.5 million in
the first half of 1998 as compared to $46.5 million in the
prior year. This increase was primarily due to an improvement
in working capital.
On February 26, 1998, the Company's Board of Directors
authorized a $150 million stock repurchase program under which
the stock will be purchased on the open market from time to
time. As of July 24, the Company had repurchased approximately
384,000 shares under this program at an average price of
approximately $52 per share.
On April 28, 1998, the Company sold its limestone operation
in Port Inland, Michigan to Oglebay Norton Company for
approximately $34 million, which was equivalent to its net book
value. This high volume commodity operation no longer
complemented the Company's long-term strategic vision. Sales
for the facility were approximately $21 million in 1997.
On April 30, 1998, the Company acquired for approximately
$33.5 million a PCC manufacturing facility located near
Birmingham in Kings Norton, England from Rhodia Limited, a
specialty chemicals company. This acquisition will allow the
Company to establish a base for its specialty PCC business in
Europe. The Company's specialty PCC products are used in food
and pharmaceutical applications, as well as in plastics,
sealants and coatings, and paper. Sales of this business in
1997 were about $18 million.
The Company has available approximately $110 million in
uncommitted, short-term bank credit lines, none of which were
in use at June 28, 1998. The Company anticipates that capital
expenditures for all of 1998 will approximate $90 million,
principally related to the construction of satellite PCC
plants, expansion projects at existing satellite PCC plants,
and other opportunities which meet the strategic growth
objectives of the Company. The Company expects to meet such
Page 11
requirements from internally generated funds, the
aforementioned uncommitted bank credit lines and, where
appropriate, project financing of certain satellite plants.
PROSPECTIVE INFORMATION AND FACTORS THAT MAY AFFECT FUTURE
RESULTS
The Securities and Exchange Commission encourages companies
to disclose forward-looking information so that investors can
better understand a company's future prospects and make
informed investment decisions. This report may contain such
forward-looking statements that set out anticipated results
based on management's plans and assumptions. Words such as
"anticipate," "estimate," "expects," "projects," and words and
terms of similar substance used in connection with any
discussion of future operating or financial performance
identify these forward-looking statements.
The Company cannot guarantee that any forward-looking
statement will be realized, although it believes it has been
prudent in its plans and assumptions. Achievement of future
results is subject to risks, uncertainties and inaccurate
assumptions. Should known or unknown risks or uncertainties
materialize, or should underlying assumptions prove inaccurate,
actual results could vary materially from those anticipated,
estimated or projected. Investors should bear this in mind as
they consider forward-looking statements and should refer to
the discussion of certain risks, uncertainties and assumptions
under the heading "Cautionary Factors That May Affect Future
Results" in Item 1 of the Company's Annual Report on Form 10-K
for 1997.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1998, the Financial Accounting Standards Board
issued SFAS No. 132, "Employers' Disclosure about Pensions and
Other Postretirement Benefits," which revises employers'
disclosures about pension and other postretirement benefit
plans. It does not change the measurement or recognition of
those plans. The statement is effective for fiscal years
beginning after December 15, 1997. The adoption of this
statement has no impact on the consolidated financial
statements.
In March 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-1 ("SOP 98-1"),
"Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." The statement is effective for
fiscal years beginning after December 15, 1998. Earlier
application is encouraged in fiscal years for which annual
financial statements have not been issued. The statement
defines which costs of computer software developed or obtained
for internal use are capitalized and which costs are expensed.
The Company adopted SOP 98-1 in 1998. The adoption of SOP 98-1
does not materially affect the consolidated financial
statements.
In April 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-5 ("SOP 98-5"),
"Reporting on the Costs of Start-Up Activities." The statement
is effective for fiscal years beginning after December 15,
1998. The statement requires costs of start-up activities and
organization costs to be expensed as incurred. The Company
will adopt SOP 98-5 for calendar year 1999. The adoption of
SOP 98-5 will not materially affect the consolidated financial
statements.
In June 1998, the Financial Accounting Standards Board
issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." The statement establishes accounting and
reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value.
The statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. The Company will adopt
SFAS 133 by January 1, 2000. Adoption of SFAS 133 is not
expected to have a material effect on the consolidated
financial statements.
YEAR 2000 CONVERSION
Management has initiated an enterprise-wide program to
improve the capability of the current information systems and
to prepare the Company's computer systems and applications for
the year 2000. The Company is presently in the midst of
installing systems which are year 2000-compliant and will
replace the majority of the legacy information technology
systems and applications. It is anticipated that such systems
will be installed by the middle of 1999. The Company does not
expect
Page 12
the total cost of the year 2000 conversion to have a material
adverse effect on the Company's future results of operations
and financial condition.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and its subsidiary Specialty Minerals Inc. are
defendants in a lawsuit, captioned EATON CORPORATION V. PFIZER
INC, MINERALS TECHNOLOGIES INC. AND SPECIALTY MINERALS INC.,
which was filed on July 31, 1996 and is pending in the U.S.
District Court for the Western District of Michigan. The suit
alleges that certain materials sold to Eaton for use in truck
transmissions were defective, necessitating repairs for which
Eaton now seeks reimbursement. While all litigation contains
an element of uncertainty, the Company and Specialty Minerals
Inc. believe that they have valid defenses to the claims
asserted by Eaton in this lawsuit, are continuing to vigorously
defend all such claims, and believe that the outcome of this
matter will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
The Company and its subsidiaries are not party to any
other material pending legal proceedings, other than ordinary
routine litigation incidental to their businesses.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting on May 28, 1998. At
the meeting, (1) John B. Curcio was elected a director of the
Company, by a plurality of 20,032,017 votes, with 304,608 votes
being withheld; (2) William C. Steere, Jr. was elected a
director of the Company, by a plurality of 20,044,448 votes,
with 292,177 votes being withheld; (3) the appointment of KPMG
Peat Marwick LLP as independent auditors of the Company for the
year 1998 was approved by a vote of 20,285,133 for and 21,278
against, with 30,214 abstentions; and (4) an amendment to the
Company's Stock and Incentive Plan was approved by a vote of
11,387,347 for and 7,435,610 against, with 57,283 abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
10.1 - Sale of Business Agreement dated 5 April 1998 among
Minteq U.K. Limited, Specialty Minerals Inc., John &
E. Sturge Limited and Rhodia Limited.
10.2 - Asset Sale Agreement dated as of April 27, 1998
between Specialty Minerals (Michigan) Inc. and
Oglebay Norton Limestone Company.
15 - Accountants' Acknowledgment (Part I Data).
27.1 - Financial Data Schedule for the six months ended
June 28, 1998.
27.2 - Financial Data Schedule for the six months ended
June 29, 1997.
b) No reports on Form 8-K were filed during the second quarter
of 1998.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Minerals Technologies Inc.
By: /s/ John R. Stack
------------------------
John R. Stack
Vice President-Finance and
Chief Financial Officer
August 6, 1998
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